Posted on 01/23/2002 7:02:34 AM PST by Stand Watch Listen
In all the charges and countercharges, accusations of fraud and name-calling that is going on about the bankruptcy of Enron, it puzzles me that almost no one in the media is talking about the fact that it is the SECOND major American power company to declare bankruptcy recently.
Pacific Gas and Electric in California, which employed 18,400 people and provided electric power to 4.5 million people filed for bankruptcy on April 2, 2001. Enron, which buys power on the supposedly "deregulated" market and sells it, has fewer transmission lines and energy producing assets in America than P.G. & E, declared bankruptcy on December 2, 2001, exactly eight months later. Enron had 21,000 employees.
We read and hear a lot of news from employees of Enron about having lost as much as a million dollars each on their Enron stock. What they really mean is, had they sold their stock, which was trading at less than $10 a share in 1992, after it had skyrocketed to a whopping $90 a share during the Clinton Administration that's what it would have been worth.
Most articles blame deregulation for the mess. Only, they rarely mention that the real problem in California, for example, was the FAILURE to actually deregulate. The so-called deregulation forced companies such as PG&E to sell their power producing assets. I lived in the Sierra foothills when some of those sales took place, due to deregulation. PG&E owned several small electric producing dams in the Sierra Mountains in El Dorado County. Under deregulation, they had to "sell" those assets.
PG&E was required by the the California Public Utility Commission(CPUC), to sell their power producing assets. Why? According to the socialist views of the U.S. Department of Energy in the Clinton Administration, "The California PUC is also charged with ensuring that the deregulated electric power system will continue to run reliably and that no generator will be able to exercise market power. The distribution of PG&E's assets among three buyers satisfied the goal of mitigating market power." (see Case 2 - Pacific Gas and Electric Company - Auction Process)
In other words, the deregulation PROCESS was set up to eliminate competition from arising among power producers. First the politicians froze the price the energy companies could sell their product to the consumer for. Next they, Democrats and Republicans, stripped the power companies of their market power by forcing them to sell their energy producing assets. Then, a new middleman was created, Enron, which could buy the energy from many sources and sell at pretty much a monopolistic price based on demand from the consumer. Since the consumer's cost was fixed, he or she had no incentive to conserve energy, although conservation was touted as a good thing.
This would be similar to fixing the price at the gas pump at, say 75 cents a gallon, while allowing the company selling the gasoline to the service station to charge the service station whatever he could get. If the service station had to sell the gas to you at 75cents a gallon, but had to pay $1 a gallon wholesale for it, don't you imagine the service station would just close down? Of course!
So, why didn't PG&E just close down? They were forced, by law, to continue to sell to the consumer, even though they were buying the power from Enron for more than they could sell it for.
What appears to have been going on in the energy sector for the past several years, after the Clintons failed to push through their plan to socialize medicine, was to develop a plan that in effect has attempted to socialize energy production. After the Democrat Governor of California, Gray Davis, made sure that PG&E lost billions of dollars, he now is demanding that PG&E sell the state its transmission lines. Of course, Davis is only willing to pay $6 billion to $8 billion and the State's refusal to allow PG&E to raise its rates when wholesale prices skyrocketed created $12 billion in debts for the energy company.
The Clinton administration's 1999 "Comprehensive Electricity Competition Act" did not insure competition, but, in the opinion of the Edison Electric Institute (EEI) it "In many respects, this bill amounts to regulation, not deregulation..."
That regulation is a major factor in the bankruptcy of both PG&E and Enron. Enron was a highly speculative venture which depended heavily on legislation being passed that would favor Enron's middleman position in delivering electricity to the consumer and help from the White House on its overseas ventures. The overseas ventures have not been profitable, and the skyrocketing price of wholesale electricity suddenly began to drop - partly because of the weather.
Those who were speculating and certain that putting all their available funds in the Enron basket now want the rest of us to do something to help them.
I wonder how many of those now complaining were planning on sharing their millions with the rest of us had they sold their stock at the top of the market?
To comment: mmostert@bannerofliberty.com
Two thousand and WHAT??
True, California still owes them some money, but it's insignificant to what happened to that company.
Do you mind giving us economics challenged folks an explanation of that? A couple of examples will suffice. Keep in mind that the sales price to the consumer was fixed and that many of the steps normally in play in a free market were frozen by law.
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I've been posting from the site Banner of Liberty / Original Sources since 1998. The author, Mary Mostert, now only sets forth a weekly column.
And this article states what so many of us following the Calpowercrisis believe so very well!
In essence, they were paid for providing a service, and the price per megawatt didn't matter.
Those rates are still in place for the most part, and people up here in Washington state remember Gov. Davis saying that he would not allow a 10% rate increase by PG&E to help keep it from bankrupcy.
And people wonder why folks up in Washington with their higher electric bills, have zero sympathy for the mismanagement caused current problems in the state of California?????
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